Jiao Jinpu,chairman of Shanghai Gold Exchange speaks on press conference to issue  the basic prices for gold trading in renminbi on April.19,2016.[Photo/IC]

On Tuesday, the Shanghai Gold Exchange issued the basic prices for gold trading in renminbi. This not only shows China is further opening up its gold market, but will also lead to better defending of domestic gold buyers' rights and interests, commented Beijing Youth Daily on Wednesday:

Who will decide the prices of commodities in the market, the buyer or the seller?

That depends on who has the higher bargaining power. The more the buyer purchases, the higher his or her bargaining power is.

However, that only applies in theory. In practice, although China is the largest producer and consumer of gold, it was not able to set the prices for gold trading before the recent move of the SGE. It was gold exchanges based in London and New York that had the absolute say over the price of gold.

Gold is only one of the commodities over which China lacks pricing power. China has long been a big purchaser of oil, beans, cotton, iron ore, rubber and corn, but its businesses suffer from high prices that are decided by exchanges located in Western countries. The SGE's move is significant for China's global pricing power.

In gold trading itself, the move is meaningful because gold is considered the ballast that stabilizes the currency prices of a state. The US dollar used to be dominant in the global financial system because it was directly linked with the price of gold from the end of World War II until 1972. It has been the steady rise in China's gold reserves that has made it possible for the SGE to gain the power to decide the trading prices.

The move will not only defend domestic gold buyers' interests and rights, but also help accelerate the Chinese currency to integrate into world markets. Of course, that requires time and there is a lot more to do before China gains global financial influence.